Exhibit 99.2
THIS NOTEHAS NOT BEEN REGISTERED UNDERTHE SECURITIES ACT OF 1933, ASAMENDED (“ACT”), ORUNDER ANY STATESECURITIES LAW ANDTHISNOTE MAYNOT BE PLEDGED,SOLD, ASSIGNED ORTRANSFERREDIN THEABSENCE OF ANEFFECTIVE REGISTRATION STATEMENT WITH RESPECTTHERETO UNDER THE ACTAND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESSTHE DEBTOR RECEIVES ANOPINION OFCOUNSEL, SATISFACTORY TO THEDEBTOR, THAT SUCHREGISTRATIONIS NOTREQUIRED.
THIS NOTEIS SUBJECT TO THEPROVISIONS OF A CERTAINSUBORDINATION AGREEMENT DATED JANUARY 12, 2018, ASAMENDED,INFAVOR OFGERBER FINANCE, INC.
ATRM HOLDINGS,INC.
PROMISSORY NOTE
| $500,000.00 | January 12, 2018 |
FOR VALUE RECEIVED, ATRM HOLDINGS, INC., aMinnesota corporation (the“Debtor”), promises to pay to the orderofLONE STAR VALUE CO-INVESTI, LP (the“Holder”), or itsregistered assigns, theprincipal amount of FIVE HUNDRED THOUSANDDOLLARS ($500,000.00), insuch coin or currencyof the UnitedStates ofAmerica asat the time ofpayment shall belegal tender for thepayment of public orprivate debts, together withinterest as set forth herein.
1. Payment ofInterest and Principal. Allunpaid principal, together withany thenaccrued and unpaid interest and any other amountspayable hereunder,shall be dueand payable onJanuary 12, 2020 (the “Maturity Date”). Ifanypayment hereunder becomes dueand payable on aSaturday, Sundayorlegal holidayunder the laws of the UnitedStates ofAmerica or the Stateof Minnesota, or both, the duedate thereof shall beextended to the nextbusiness dayand interest shall bepayable for anyprincipal soextended for the period ofsuch extension.Payments ofprincipal and interest are to be madeat theaddress provided herein for the Holder (orat suchother place as the Holdershall have notified theDebtor inwriting at least five (5) daysbefore suchpayment is due) orby wiretransfer pursuant to theHolder’s written instructions.Payments ofinterest and principal aresubordinate toany indebtednessevidenced by promissory notesheld byLone Star ValueInvestors, LP.
2. Interest. (a) Interest shall accrue on theunpaid principalbalance of this Noteat therate of tenpercent (10.0%)per annum,and shall bepayable semiannually incash on the tenthbusiness day ofeach Januaryand July(each, an “Interest Payment Date”) inrespect of the immediately preceding semi-annualperiod;provided,however, ifan Event ofDefault (asdefined inSection 4 below) oran event with thepassage of time or thegiving ofnotice could becomean Event ofDefault, has notoccurred, then theHolder mayelect to receive anysuch interest payment by substituting for theabovementioned interest rate arate oftwelve percent (12.0%) per annum for theapplicable interest period (“PIKInterest”) andelect to receive apayment entirely as PIK Interest oras 50%cash and 50%PIK Interest by delivery to the Debtor of written notice of its election andacompletedAllonge (in theform annexed hereto inExhibit A)at least five (5)business days prior to theapplicable Interest Payment Date. Debtor shall deliver to the Holder an executed copy of such completedAllonge promptly after its receipt thereof. PIK Interest shall bear interest from the applicableInterest Payment Date at thesame rateand be payable in thesame manner as in the case of theoriginal principal amount of this Noteand shallotherwise betreated as principal of this Note forall purposes. From and after each Interest Payment Date with respect towhich theDebtor elects to payPIK Interest, theprincipal amount of this Noteshall, withoutfurther action on thepart of theDebtor or theHolder, bedeemed to beincreased by thePIK Interest socapitalized and added toprincipal in accordance with the provisionshereof. Interest shall be calculatedfrom and include the datehereof and shall becalculated onan actual/360-day basis.
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(b) Notwithstandinganything to the contrary containedherein, in noevent shall this or any other provision herein permit thecollection of anyinterest which would be usurious underapplicable law. If under anycircumstances, whether byreason ofadvancement oracceleration of the maturity of theunpaid principal balance hereof orotherwise, theaggregate amountspaid under this Noteshall include amountswhich by laware deemedinterest and which wouldexceed the maximumrate permitted bylaw, theDebtor stipulates thatpayment and collection ofsuch excess amounts shall have been and will bedeemed to have been the result of a mistake on the part of both theHolder and theDebtor, and theHolder shall promptlycredit such excess (only to the extentsuch payments are inexcess of the maximumrate) against the unpaidprincipal balance hereof and any portion ofsuch excess payments notcapable of being socredited shall berefunded to theDebtor.
3. Prepayment. TheDebtor shall beentitled toprepay theprincipal amount of this Note (in whole or inpart) together withall interest under this Noteaccrued and unpaid at thedate ofprepayment at any timewithout penaltyorpremium upon five(5)days priorwritten notice to theHolder. TheDebtor shall beobligated toeffect suchprepayment withinthree(3)days after theend of suchnoticeperiod.
4. Events ofDefault. (a)Acceleration. Upon theoccurrence ofany of the following events(herein called “Events of Default”):
(i) The Debtorshall fail to make fulland timelypayment ofprincipal of orinterest on this Notewhen dueand such failure continues for aperiod offive (5) consecutive days;
(ii) (A) The Debtor orany of itsmaterial subsidiaries shall commenceany proceeding or otheraction relating to it in bankruptcy orseek reorganization,arrangement, readjustment of itsdebts, receivership, dissolution, liquidation,winding-up, composition or any otherrelief underany bankruptcylaw, orunderany otherinsolvency, reorganization, liquidation,dissolution, arrangement, composition, readjustment of debt or any other similar act or law, of any jurisdiction, domestic or foreign, now or hereafter existing; (B) the Debtor or any of its material subsidiaries shall admit the material allegations of any petition or pleading in connection with any such proceeding; (C) the Debtor or any of its material subsidiaries shall apply for, or consent or acquiesce to, the appointment of a receiver, conservator, trustee or similar officer for it or for all or a substantial part of its property; or (D)theDebtor orany of itsmaterial subsidiaries shall make ageneral assignment for thebenefit ofcreditors;
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(iii) (A) The commencement of anyproceedings or the taking of any otheraction against theDebtor orany of itsmaterial subsidiaries in bankruptcy or seekingreorganization, arrangement, readjustment of itsdebts, liquidation, dissolution,arrangement, composition, orany otherrelief underany bankruptcy law orany othersimilar act or law ofany jurisdiction, domestic orforeign, now orhereafter existing; (B) theappointment of areceiver, conservator, trusteeorsimilar officer for the Debtor or any of itsmaterial subsidiaries forany of itsproperty;or(C) theissuance of awarrant ofattachment, execution orsimilar process against any of the property of theDebtor orany ofitsmaterial subsidiaries, and thecontinuance ofany suchevents for sixty (60)days undismissed,unbonded orundischarged;
(iv) TheDebtor breaches anyof itsrepresentations and warranties made under thatcertain Securities Purchase Agreement, dated as of thedate hereof (the “PurchaseAgreement”),by andbetween the Debtor and theHolder;
(v) TheDebtor shall fail to comply with anyofitscovenants orobligations under this Note(other thansuch failure described subsection (i)above) or thePurchase Agreement, which failure shall continue uncured for thirty (30)calendar days after noticethereof to theDebtor;or
(vi) The Debtor shall, directlyorindirectly, in one or morerelated transactions, (A)consolidate or merge with or into(whether or notDebtor is the surviving corporation)another person, (B)sell, assign, transfer, conveyorotherwise dispose ofall or substantiallyall of theproperties orassets of Debtor toanother person, (C) allowanother person to make apurchase, tender orexchange offer that isaccepted by theholders ofmorethan 50% of the outstandingshares of theDebtor’s common stock, par value $0.001 per share (the “CommonStock”) (not includinganyshares of CommonStock heldby theperson orpersons making or party to,or associated oraffiliated with the persons makingor party to,suchpurchase, tender orexchange offer), or (D)consummate a stockpurchase agreement or otherbusiness combination (including, withoutlimitation, areorganization, recapitalization or spin-off) with anotherperson whereby such otherperson acquires more than 50% of the outstandingshares of Common Stock (not includinganyshares of Common Stockheldby the otherperson or otherpersons makingor party to, orassociated oraffiliated with the otherpersons making or party to,such stock purchase agreement or other business combination);
then,and inanysuch event, theHolder, at theHolder’s optionand withoutwritten notice to theDebtor,may declare the entireprincipal amount of this Note thenoutstanding together withaccrued unpaidinterest thereon immediately dueand payable, and thesame shall forthwith become immediately dueand payable withoutpresentment, demand, protest, or othernotice of any kind,all of whichare expressly waived. TheEvents ofDefault listedherein are solely for the purpose ofprotecting theinterests of theHolder of thisNote. If this Note is notpaid in full uponacceleration, as required above,interest shall accrue on theoutstanding principal ofand interest on this Notefrom thedate of theEvent ofDefault up toand including the date ofpayment at arate equal to the lesser of twelvepercent (12.0%) per annumcompounded on the third businessday ofeach JanuaryandJuly or the maximuminterest ratepermitted byapplicable law.
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(b) Non-Waiver and Other Remedies. Nocourse ofdealing or delay on thepart of theHolder of this Note inexercising anyright hereunder shalloperate as awaiver or otherwise prejudice theright of the Holder of thisNote. No remedyconferred in this Note or the PurchaseAgreement is intended to be exclusive of any otherremedy, and each and every such remedyshall be cumulativeand shall be inaddition to every other remedyconferred herein or now orhereafter existing at law or equity or by statute orotherwise.
(c) Collection Costs; Attorney’s Fees.In thecase ofan Event ofDefault, if this Note isturned over toan attorney forcollection, theDebtor agrees topayall reasonable costs ofcollection, including reasonableattorney’s fees andexpenses and all out-of-pocket expenses incurred by the Holder inconnection withsuch collection efforts.
5. Additional Covenants. Untilall principal and interest due hereunder hasbeen repaid in full incash, unless theHolder shall otherwise consent, in its solediscretion, inadvancein writing, theDebtor hereby covenantsand agrees to:
(a) furnish and provide tothe Holder thirty (30)days priorwritten notice ofany of the following actionsbetween theDebtor or Debtor’s affiliatesandany third-party lender: (i)renewal ofany indebtedness; (ii) extension of thetime ofpaymentof anyindebtedness orany portion ofsuch indebtedness; or (iii) loans ordebt with or without aguaranteeto the Debtor;
(b) provide to theHolder, promptlyafter the Debtor obtainsactual knowledge thereof, notice ofall legal proceedings or ordersagainst either the Debtor or anyof itsaffiliates that, ifdetermined adversely to theDebtor orany of itsaffiliates, would reasonably beexpected to have amaterial adverseeffecton the business,assetsorproperties of theDebtor, taken as a whole;
(c) provide to theHolder promptly(and inany event withinthree (3) businessdays) after theoccurrence ofeach event which isan Event ofDefault (i)as defined hereinor (ii)as definedby anyagreement by Debtor, orDebtor’s affiliates to repayanyindebtedness ofany kind that issenior inrightofpayment to theobligations of the Holder, awritten notice ofsuch event ofdefault, setting forth the details of suchevent and theaction (ifany) that the Debtorproposes totake withrespect thereto;
(d) notamend, or modify in any manner adverse to theHolderany provision of theDebtor’s articles ofincorporation orbylaws;
(e) not repayany indebtedness of any kind of the Debtorand Debtor’s affiliates that issubordinate inright ofpayment to theobligations of the Holder or Holder’saffiliates;
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(f) notinitiate or enforce any actionagainst a thirdparty, debt holder, orlender ordefend against any actionby a thirdparty, debtholder, or lender; other than in thenormal course ofbusiness (including but not limited tocollection and liens ofclient accounts);and
(g) useall power andcontrol toassure Debtor’s affiliates do notinitiate orenforceany action against a thirdparty, debtholder, or lender or defendagainstanyaction by a third party, debtholder, or lender; other than in the normal course ofbusiness (including but not limited tocollection and liens ofclient accounts).
6. Cancellation. Upon fullsatisfaction of the Debtor’s obligationshereunder, theHolder shall promptly deliver or cause to bedelivered to the Debtor this Note forcancellation.
7. Amendment; Waiver. This Note may not beamended ormodified or the provisionshereof waived (either generallyor in a particular instanceandeitherretroactively orprospectively) without the prior writtenconsent of the partyagainst whomsuch amendment, modification, or waiver is sought to beenforced. All of theterms and provisions of this Noteshall beapplicable toand binding uponeach and every maker,Holder, endorser, surety, guarantor and all other persons whoareor may becomeliable for thepayment hereof and their respective successorsand assigns.
8. Lost Documents. Uponreceiptby theDebtor ofevidence satisfactory to it of the loss,theft, destruction ormutilation of this Note or any noteexchanged for it,and (in thecase of loss,theftordestruction) of indemnity reasonably satisfactory to it,and uponsurrender and cancellation ofsuch note, if mutilated, the Debtor will makeand deliver inlieu ofsuch note a new note of like tenorand unpaidprincipal amount and dated as of theoriginal date of theoriginal note.
9. Miscellaneous.
(a) Severability.Incaseany one or more of theprovisions contained in this Note should be invalid,illegal or unenforceable in any respect, thevalidity, legality and enforceability of the remaining provisions containedherein shall not inany way beaffected orimpaired thereby.
(b) Notices and Addresses. Allnotices, offers, acceptances andany otheracts under this Note(except payment) shall be inwriting, and shall be sufficientlygiven ifdelivered to theaddressee inperson,byFedEx orsimilar receipted delivery,byfacsimile delivery with confirmedreceipt or, if mailed,postage prepaid,bycertified mail,return receipt requested, as follows:
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ToHolder:
LoneStarValue Co-InvestI,LP
53Forest Avenue,1st Floor
OldGreenwich, Connecticut 06870
Attn: Jeffry E. Eberwein, Manager
and
Hannah Bible, General Counsel
Fax: (203) 990-0727
To theDebtor:
ATRM Holdings,Inc.
5215 Gershwin Avenue N.
Oakdale, Minnesota 55128
Attn: Daniel M. Koch, President and Chief Executive Officer
Fax: (651)770-7975
With a copy to(which shall notconstitute notice):
Olshan Frome WoloskyLLP
1325Avenueof theAmericas
New York, New York 10019
Attn:Adam Finerman, Esq.
Fax: (212)451-2222
or tosuch otheraddress as anyofthem,bynoticeto theothersmaydesignate from time totime.
(c) Governing Law. This Noteandany dispute,disagreement,or issue ofconstruction orinterpretation arising hereunder,whether relating to itsexecution, itsvalidity, theobligations provided therein orperformance, shall begoverned and interpreted according to the lawof the StateofMinnesota, withoutregard to principals of conflicts oflaw.
(d) Binding Effect; Assignment. This Noteand thevarious rights and obligations arising hereundershallinure to the benefit ofand be binding upon theparties hereto and their respectivesuccessors and permittedassigns. The Debtor may not delegate, transfer or assign any rights or obligations hereunder without the Holder’s prior written consent. The Holdermay not assign or delegate all or any portion of the rights of the Holder hereunder without the consent of the Debtor (such consent notto be unreasonably withheld, conditioned or delayed), except that no such consent shall be required for an assignment or delegationto an affiliate of the Holder or while an Event of Default has occurred andis continuing. Any transfer orassignment ofany of therights, interests orobligations hereunder inviolation of theterms hereof shall be void and of noforceor effect.
(e) Jurisdictionand Venue. Each of theHolder and theDebtor (i)agree thatany legal suit, action or proceeding arising out of or relating to this Noteshallbe instituted exclusively in thecourtsof NewYork County in the State ofNew York, (ii)waiveany objection tothe venue of anysuch suit,action orproceeding and theright toassert that such forumis not a convenient forum,and (iii) irrevocablyconsent to thejurisdiction of thecourts ofNew York County in the State ofNew York in anysuch suit,action orproceeding, andfurther agree toaccept and acknowledge service ofanyand all process whichmay be served inany such suit,action orproceeding and agree thatservice ofprocess upon them mailedbycertified mail totheir respective addresses shall bedeemed in everyrespect effectiveserviceofprocess upon them in anysuch suit,action orproceeding.
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(f) Section Headings. Sectionheadings herein havebeen inserted forreferenceonlyand shall not bedeemed to limit orotherwise affect, inanymanner,or bedeemed tointerpret in whole or inpartany of theterms orprovisions of this Note.
(g) Waiver ofPresentment. Debtor and each surety, endorser and guarantor hereof herebywaive all demands forpayment, presentations forpayment, notices ofintention toaccelerate maturity, notices ofacceleration ofmaturity, demand forpayment, protest, notice ofprotest and notice of dishonor, to the extentpermitted by law,except for thosenotices expresslyprovided forherein. No extension of time forpayment of this Note or any installmenthereof, noalteration, amendment or waiver of any provision of this Noteshall release, modify, amend,waive, extend,change, discharge,terminate oraffect the liability of Debtorunder this Note.
(h) Forbearance.Anyforbearanceby the holder of this Note inexercisinganyright or remedy hereunder or underany otheragreementorinstrument inconnection with thisNoteorotherwise afforded byapplicable law shall not be awaiver orpreclude the exercise ofanyright or remedyby the holder of thisNote. Theacceptanceby the holder of this Note ofpayment of any sumpayable hereunder after the duedate ofsuch payment shall not be awaiverof theright of the holder of this Note torequire promptpayment when dueofall other sumspayable hereunder or to declare adefault forfailure tomakepromptpayment.
(i) Acceleration. At theelection of theholder of thisNote, all payments duehereundermay beaccelerated, and this Noteshall become immediately dueand payable withoutnotice ordemand, upon theoccurrence ofan Event ofDefault under thisNote, which default is notcured withinany grace period expressly providedtherefor. Inaddition to therights and remedies provided herein, the holderof this Note mayexercise any otherright orremedy inany other document,instrument oragreement evidencingorotherwise relating to theindebtedness evidenced hereby in accordance with theterms thereof, or underapplicable law, all ofwhich rights andremedies shall becumulative.
(j) Construction. This Noteshall beconstrued without anyregard to any presumption or rule requiringconstruction against the party causingsuch instrument or any portionthereof to bedrafted.
[Signature Page Follows]
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[SIGNATURE PAGE OF ATRM HOLDINGS, INC. PROMISSORY NOTE]
INWITNESS WHEREOF, the Debtor has caused this Note to be made and issuedinits name on the date specified above.
| ATRM HOLDINGS, INC. | |||
| By: | /s/ Daniel M. Koch | ||
| Name: | DanielM. Koch | ||
| Title: | President andChief Executive Officer | ||
EXHIBIT A – FORM OF ALLONGE
PROMISSORY NOTE ISSUED JANUARY 12, 2018
ThisAllonge No.____ to theLone StarValue Co-InvestI, LP Note(“Allonge”) is made this______day of _______________,byATRM Holdings,Inc. a Minnesotacorporation (“Debtor”) toLone Star ValueCo-InvestI, LP(“Holder”). Reference is hereby made to thatcertain Promissory Noteissuedby Debtor to Holder datedJanuary 12, 2018,(the “Note”). Except as amended hereby, the terms of theNote remain as originally stated.
Theprincipal amount as stated on theface of the Noteshall beincreasedby thePIK Interest in theamount of $_______________as of [the semi-annualInterest Payment Date]. Interest on theincreased portion of theprincipal amount shall accrue from [the semi-annualinterest duedate]. The sumrepresents PIK Interest accrued on the outstandingprincipal amount of the Noteat theannual rate of 12%from_______________through_______________.
Theamendment to theprincipal amount due and owing on the Note describedherein notwithstanding, Holderdoes not waiveinterest thatmay haveaccrued at adefault rateofinterest and liquidated damages,ifany, that may haveaccrued on the Notethrough thedate of thisAllonge, which default interest andliquidated damages, ifany, remain outstandingand payable.
INWITNESS WHEREOF, thisAllongeis executedas of thedate written above.
| ATRM HOLDINGS, INC. | |||
| By: | |||
| Name: | |||
| Title: | |||
